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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#491

Post by WalterBright »

dredmorbius wrote: post #487
WalterBright wrote: post #465

Earlier quoted context omitted.

If that were true, every job I've had would be at minimum wage. But I tended to be well-paid, despite being at the bottom of the organizational pyramids. As for blacklists, there are solutions. Blacklisted people can join together and start their own enterprises. One of the nice things about a free market is you can't stop people from doing that.

> every job I've had would be at minimum wage. The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the con…

> the law

Notice how they used the law to prevent the free market from operating. They had to use the law because the free market did work around it.

Re: What harm do minimum wages do?

#492

Post by typ »

aidenn0 wrote: post #401
gjulianm wrote: post #4

> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiatio…

>> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. This sentence is just wrong. First of all a rational actor will not intentionally pay a worker the value of their production; you get no profit. Textbooks actually say that a worker will be paid no more than the marginal product of labor, and if labor is in short sup…

> First of all a rational actor will not intentionally pay a worker the value of their production; you get no profit.

The sum of the production of workers is not equal to the production of a business.

Otherwise, if a business increases revenues significantly by simply replacing its CEO, does it mean that the CEO contributes to the increased revenue all alone?

Re: What harm do minimum wages do?

#493

Post by Wump »

Chris Rock had a great sketch about minimum wage:

'I used to work at McDonald's making minimum wage. You know what that means when someone pays you minimum wage? You know what your boss was trying to say? It's like, "Hey if I could pay you less, I would, but it's against the law."'

https://www.youtube.com/watch?v=F_Fr1djc67U

Re: What harm do minimum wages do?

#494

Post by whiddershins »

I’ve always been all for the minimum wage. Seems like it should be a helpful and/or necessary leveler.

Lately though, sometimes ... I’ll get a disorienting flip around in perspective and I will think just what gives you the right to step between me and another consenting adult when we attempt to make a transaction!

And it feels almost gross that the government would paternalistically step in and tell us what agreement we are allowed to make.

I’m not sure what I think in the end. Somehow both things feel true simultaneously.

Re: What harm do minimum wages do?

#495

Post by pcvarmint »

A lot.

They make it illegal for you to hire someone at a rate below the minimum wage, even if they agree to it.

They force unemployment of those with skills below the average minimum-wage employee's.

They pick an arbitrary minimum wage mandated by government fiat, instead of determined in the marketplace. Such an arbitrary wage suffers from the economic calculation problem, where rational allocation of goods is impossible without free markets and prices to communicate supply and demand.

Changes in the minimum wage affect other things, like the price of food in restaurants, in way which is nonlinear from the actual supply and demand of those goods and services. It's as though there is pressure for prices to move upwards or downwards in response to market conditions, but the minimum wage, or other prices directly affected by the minimum wage, are not allowed to respond to those market conditions, and so a shortage or oversupply occurs.

https://fee.org/articles/topics/minimum%20wage

Re: What harm do minimum wages do?

#496

Post by themacguffinman »

Sohcahtoa82 wrote: post #256
throwaway894345 wrote: post #137

Earlier quoted context omitted.

> even though crucially that value was created by the worker Crucially the value wasn't created by the worker, but rather the worker played a part in the creation of that value. In a capitalist society, that worker's wage is determined based on the value of their contribution and the supply of workers with the requisite skill. In a Marxist society, it is set by the state, and it seems to be very hard for states to de…

> In a capitalist society, that worker's wage is determined based on the value of their contribution and the supply of workers with the requisite skill. I think we need to define "value of their contribution". If a friend of mine has an idea for an app, but he has zero programming knowledge and so he pays me $1,000 to develop it, and he ends up making $1,000,000 from selling it, what is the value of my contribution?…

Every worker gets to do this, and it happens a lot in startups and big companies alike. Stocks and stock options are (varyingly) anchored to whole-company valuation, and early / senior employees that produce more value will often get more stock because they comprise a greater share of the company's health.

If your friend insists on paying you a low flat fee for doing highly lucrative work, your rational choice is to turn down the offer and find another employer, or even go at it on your own. Your friend's rational choice is to negotiate because the lost profits from you (and others) declining the offer is worth more than the profits he loses by paying you more.

Regardless of that, a single transaction like this is often not sufficient to accurately determine the market value of your contribution. Market valuation happens in aggregate for this reason. A single irrational transaction like the one you described just represents a market inefficiency.

Re: What harm do minimum wages do?

#497

Post by pchristensen »

Ekaros wrote: post #227
pchristensen wrote: post #48

Earlier quoted context omitted.

Not defending Wal-Mart's labor practices, but there are probably very, very many companies where they have the single largest collection of workers who $INSERT_CONDITION_HERE.

I would actually say that it is the opposite... As there is few very large employers. Wal-mart being largest one of them. Companies employing lot of people also has largest collection of workers with $INSERT_CONDITION_HERE. Not that the whole sector couldn't do better. Wal-Mart just having that statistic because they employ the most.

Sorry, that's what I meant to say. Wal-Mart is the largest private employer by a factor of 3. They're probably first in many categories (of absolute numbers, not percentages) based on the size of their workforce.

Re: What harm do minimum wages do?

#499

Post by pchristensen »

nobody9999 wrote: post #87
pchristensen wrote: post #6

(can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost citi…

>The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost cities and states. The right policy for San Francisco isn't necessarily right for Birmingham. Your point is a valid one. At the same time, if you look at how these numbers actually play out in reality, $15/hour (assuming 40 hours/week -- certainly not a given an…

I left that part out, but yes, $15 is too little to live on in expensive cities and too much for the economy to function in low cost ones. So I thought "Fight for $15" was a bad call, because it would be a generational fight that would start out insufficient and lose ground over time to inflation.

Re: What harm do minimum wages do?

#500

Post by gjulianm »

macspoofing wrote: post #478
gjulianm wrote: post #447

Earlier quoted context omitted.

> That's not what a free market means. It looks like in this thread people have different definitions of free market. For me, the fundamental property is that supply and demand respond elastically to price changes, and a quick test (necessary, not sufficient) is the following: if the price asked by buyers is too low, does supply stop? For example (and simplifying), if people wanted to pay just $1 for consoles, the su…

>It looks like in this thread people have different definitions of free market. No. Words have meaning. You made up a definition for 'free market'. >For me ... Well how about we use the general understanding free market? It just makes it easier when you don't redefine common terms. But OK ... >Now, for jobs, if companies wanted to pay just $1 an hour, would people stop working? Yes. They would indeed not bother worki…

> But try it. I can guarantee you that even poor migrant workers would laugh at you if you offered them that kind of wage.

You're imagining a company offering low wages in world where the rest offer higher wages. In that example, I'm saying all companies offer low wages. It's an artificial example, of course, but shows how labor market is not elastic, and therefore cannot be a free market. I don't know which definition of free market you use, but I haven't seen anyone that accommodates that situation.

> That is not an alternative. I'm not even sure if there was a single case of starvation in the last few decades that was a result of lack of income or lack of a job.

Well, if you want to take things literally, replace "starve" by "stop having a decent life". Losing your house, for example.

> On the other hand, plenty of starvation in Soviet Russia ... with full employment!

Hey, if your argument against worker rights is going to boil down to "but Soviet Russia and communism bad!" we can stop right now.

> Unemployed people do not die.

Yeah, people without work just chill. Nobody needs to work to eat, or pay their house, or their car, or their bills.

> No. It's not. It is an unregulated market where minimum wage laws are ignored, and yet, you don't see a race to the bottom. The wage settles at some equilibrium.

One of the biggest collectives of undocumented workers in the US are farmworkers. Read on the conditions of those people (e.g., [1]) and tell me it's not a race to the bottom. I couldn't find stats regarding their wages, but I don't assume they're good. The only studies I've found say that undocumented workers will earn less than their documented counterparts even after adjusting for skills and education [2].

It's of course a complex issue and analyzing the causes of a certain wage level in a certain sector are pretty complex. But the incentives are clearly there for companies to push for wages way below a livable level.

1: https://www.pewtrusts.org/en/research-and-analysis/blogs/sta... 2: https://econofact.org/what-explains-the-wages-of-undocumente...

> That's not what you said. You wrote: "Workers can't usually live too much without finding a job."

Do you mean people living on subsidies? Well, that's precisely what I'm advocating for with that example. If you want, I can complete the sentence with "Workers can't usually live too much without finding a job and no income".

> There are tens of millions of people without income or a job - how do they survive?

Where and in what conditions? Because if you're arguing that minimum wage laws are not necessary because if you're jobless and homeless you won't die right away, well...

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